Asian stocks scaled to record highs on Thursday as investors were hopeful the incoming Biden administration will be able to secure passage of a massive new stimulus package to cushion the economic damage of the Covid-19 pandemic.
Republicans in the US Congress have indicated they are willing to work with President Joe Biden on his administration’s top priority, a $1.9 trillion US fiscal stimulus plan, but some are opposed to the price tag. Democrats took control of the US Senate on Wednesday, though they will still need Republican support to pass the programme.
But after record high closes on Wall Street Wednesday, markets in Asia reflected relief over an orderly transition of power and strong expectations that US stimulus will provide continued support for global assets.
European shares were set to motor on, with pan-region Euro Stoxx 50 futures up 0.39 per cent, German DAX futures 0.4 per cent higher and FTSE futures up 0.6 per cent.
Kay Van-Petersen, global macro strategist at Saxo Capital Markets, said that Democratic control of the Senate “increases not just the probability of more fiscal (stimulus), but the magnitude.”
“That means that this market should be way, way, way higher as a whole and we’re going to get there. We’re entering this regime of even more accelerated asset class inflation,” he said.
MSCI’s broadest index of Asia-Pacific shares outside Japan touched record highs and was last up 0.92 per cent, with markets across the region posting gains.
Chinese blue-chips added 1.75 per cent, Australian shares climbed 0.79 per cent and Seoul’s Kospi rose 1.54 per cent.
Japan’s Nikkei was up 0.82 per cent, less than 1 per cent off three-decade highs reached last week.
The rises in Asia followed fresh record highs on Wall Street overnight. The Dow Jones Industrial Average rose 0.83 per cent, the S&P 500 gained 1.39 per cent and the Nasdaq Composite added 1.97 per cent. On Thursday, e-mini futures for the S&P 500 ticked up to new records, and were last 0.34 per cent higher.
“The market is still taking a sanguine view to tighter regulatory/tax risks given the narrow Senate majority, while still expecting additional fiscal stimulus,” Tapas Strickland, an economist at National Australia Bank, said in a note.
Tech shares stood out after Netflix Inc said it would no longer need to borrow billions of dollars to finance its TV shows and movies, prompting a near 17 per cent surge in its shares.
Along with Netflix, the rest of the FAANG group, scheduled to report results in the coming weeks, rallied. Google parent Alphabet rose 5.36 per cent.
As equity gauges rose, US stimulus hopes weighed on the greenback, pushing the dollar index down 0.17 per cent to 90.254.
The dollar was off 0.14 per cent against the yen at 103.37 and the euro gained 0.25 per cent on the day to $1.2134.
Benchmark US 10-year Treasury notes yielded 1.0785 per cent, down from a US close of 1.09 per cent on Wednesday.
In commodity markets, oil prices eased on an unexpected rise in US crude stocks, though hopes for an economic revival kept losses in check. US West Texas Intermediate crude dipped 0.24 per cent to $53.18 a barrel. Brent crude fell 0.16% to $55.99 per barrel.
Spot gold rose 0.15 per cent to $1,873.77 per ounce.